Without co-signer, minor's debt likely off-limits to collectors

Erica Sandberg is a prominent personal finance authority and author of "Expecting Money: The Essential Financial Plan for New and Growing Families." She writes "Opening Credits," a weekly reader Q&A column about issues for people who are new to credit, for CreditCards.com.

Dear Opening Credits,
When I was 17, I got a credit card from a reputable Arizona bank
that knew I was a minor. When I could not make the payments, my account was
sent to collections. I tried to do the responsible thing and make the payments.
The collections office required access to my bank accounts so they could take
out money whenever they wanted. As of six months ago, they refused payments and
would not answer my calls or letters. Now they are attempting to garnish my
wages and tack on more lawyers and court fees. Can they do this? I've done
everything I can to make payments and now have a court hearing scheduled. -- Brad

Dear Brad,
Hmmmmm, a few things about your letter don't sound right.

Assuming the Arizona bank that gave you a credit card is
as reputable as you say, then they would not have issued you a credit card
without an adult acting as co-signer. Did someone -- a parent, uncle, older
sibling, anyone -- help you get the account? If so, the financial institution
did nothing wrong in providing you with the card.

Now, if the bank did provide you with a credit card when you were a minor without an adult's guaranteeing signature, then there is a chance
that you can escape paying for what you charged, as well as this whole legal
mess. To find out, contact the initial issuing bank and request the original
application. With some research, they should be able to pull up those facts.

If it turns out that only your name is on the paperwork,
contact the collection agency with this information immediately. Though they
aren't answering your calls, leave a message anyway and write them letter to
back up your story. Explain (and provide proof) that you were under the age of
18 when the card was given to you, and no adult was accountable for the charges.
The company may get your letter in time and just drop the entire affair. If
not, bring the information with you to court -- which means you better get
right on this task.

Conversely, if you find that there is someone else's name
on the paperwork, the collection agency has every right to take legal action.
However, it should be the co-signer, not you, who is sued for the debt. You
could point this out to them now or wait until you get to court, but it would
be kind of a crummy thing to do to someone who helped you get the card in the
first place.

That said, another fact about your situation also sounds
peculiar: Why would a collection agency that had been accepting steady payments
straight from your bank account suddenly stop and decide to sue?

I'll deduce that at some point you didn't have enough
funds in your account to cover the agreed-upon installment payment. Frankly,
that's the only reason I can imagine that they would pull the rug out from
under you. You see, third-party collectors are not in the business of extending
credit; they are in the business of collecting money. If there wasn't enough in
the account when they went to claim it, the deal was rescinded. Now they want
all of the cash -- thus the lawsuit.

Though you have a scheduled court hearing, you can still
contact the collection agency and pay off the remaining debt. Do so and you and any co-signer may be able to avoid a judgment.

Whatever you do, make sure you attend your court hearing.
If you don't, you'll lose the case by default. At that point, either you or the
co-signer will be held responsible for the remaining balance as well as all sorts
of lawyer's fees and court costs. More, the judgment creditors will be able to
do pretty much whatever they are allowed to do -- including a wage garnishment,
if permitted in your state -- to collect.

So go and have your day in court. You may even get a
break. If your installment payments were, in fact, steady and the collector is
just being difficult, the judge may allow you to make stipulated payments and
keep the problem off of the credit reports of all concerned.

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Published: May 19, 2010

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